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Proposal 2—amendments to avoid unintended consequences of updating the reference:

the exception for liabilities and contingent liabilities within the scope of IAS 37 or IFRIC 21

further amendments respondents think might be needed to address other possible consequences of updating the reference

Proposal 3—to clarify IFRS 3 requirements for contingent assets

Other aspects of IFRS 3

Transition and early application

Implications for other projects

Proposal 1

All respondents supported the proposal.

Proposal 2

Almost all respondents supported the proposed exception. A few respondents said they supported it as a temporary solution, on the assumption that the Board will align IAS 37 and IFRIC 21 with the 2018 Conceptual Framework in the future. A few respondents did not support the proposed exception. These respondents agreed that IFRS 3 should be amended to avoid day 2 losses or gains, but disagreed with the method the Board proposed to achieve this outcome.

The staff do not think these comments indicate a need for the Board to reconsider this aspect of the proposals.

In addition, respondents identified three possible consequences of updating the reference to the Conceptual Framework, asking the Board to make further amendments to IFRS 3 to address these consequences. These pertain to uncertain tax treatments, reliable measurement recognition criterion and distinguishing applications of the recognition principle from exceptions.

The staff think that these three areas merit further consideration by the Board. They plan to prepare an analysis for discussion at a future Board meeting.

Proposal 3

Almost all respondents supported this proposal. However, a few respondents said they opposed the proposal. Their reasons suggest they disagree with the existing IFRS 3 requirements, rather than with the Board’s proposal to make those requirements more explicit. They think that entities should recognise contingent assets acquired in a business combination.

One respondent asked the Board to eliminate a difference between the requirements of IFRS 3 and those of IAS 37, which arises when it is ‘virtually certain’ that a contingent asset will become non-contingent.

The staff think that respondents’ concerns about the requirements for contingent assets relate to existing IFRS 3 requirements that are unaffected by updating the reference to the Conceptual Framework. Addressing such concerns is beyond the scope of this project so the staff suggest that the Board need not consider them further in finalising the amendments.

Other aspects of IFRS 3

Some respondents asked the Board to address other matters they regard as problems with IFRS 3. Most of these respondents referred to the difference between the measurement requirements of IFRS 3 and those of other IFRS Standards, most notably IAS 37 and IAS 12 / IFRIC 23. A few respondents asked the Board to review other aspects of IFRS 3 as well.

The staff think that the respondents’ suggestions relate to existing IFRS 3 requirements that are unaffected by updating the reference to the Conceptual Framework. Addressing such concerns is beyond the scope of this project so the staff suggest that the Board need not consider them further in finalising the amendments.

Transition and early application

Some respondents commented on these proposals. All expressed unqualified support, except one, which disagreed with the proposal not to require disclosure of early application.

The staff plan to re-analyse the need for disclosure of early application after the Board has re-deliberated all technical aspects of the proposals.

Implications for other projects

Some respondents referred to the possible project to align IAS 37 with the 2018 Conceptual Framework. They expressed support for this project, a few urging the Board to complete it as soon as possible. One respondent suggested the Board consider aligning IFRIC 21 first while another suggested there are several other IFRS Standards that are inconsistent with the 2018 Conceptual Framework. They suggested the Board should consider a wider project to align all these Standards with the 2018 Conceptual Framework to promote consistency in financial reporting and avoid confusion.

The staff will soon ask the Board to decide whether to take on a project to amend aspects of IAS 37 and, if so, what to include in the scope of the project. The staff plan to take no further action in response to the suggestion that the Board undertake a more general project to align all existing IFRS Standards with the 2018 Conceptual Framework.

Board discussion

The staff briefly introduced the papers and requested that the Board provide comments and questions. The Board was not asked for decisions.

In general, the Board supported the proposals.

A number of Board members raised the implications of the feedback for other standards and projects. Despite this feedback, the scope of the project must be considered. A number of suggestions would exceed the scope of the project. Furthermore, other out of scope items identified should not compromise the timeline of the project.